Louisiana to roll out federal funds to mitigate effects of foreclosures

The federal government has approved Louisiana's plan for distributing $34.2 million made available through the Neighborhood Stabilization Program to help return foreclosed properties to the marketplace and prevent them from undermining the value of nearby property.

Congress set aside $4 billion last year to help contain the sprawling damage from the foreclosure crisis, which has been especially acute in states like California, Florida and Nevada, where inflated home prices combusted with shoddy lending practices to produce the current meltdown.

States received money in proportion to their foreclosure numbers, and Louisiana, which has recorded among the lowest number foreclosures of any state, was allotted far less than some of its western peers.

Nonetheless, a few neighborhoods in Baton Rouge and Shreveport have begun to show signs of exposure to the foreclosure crisis. The state will concentrate its pool of Neighborhood Stabilizaton money in the most vulnerable census tracts, rather than dilute the funds among parishes that have mostly been immune.

In addition to the funds earmarked for Louisiana as a whole, the federal government set aside $2.3 million solely for use in New Orleans. While individual investors, nonprofits and developers from the city can tap the larger statewide pool, the $2.3 million is exclusively for use in troubled neighborhoods in New Orleans.

The New Orleans Redevelopment Authority will administer that money, while the Louisiana Housing Finance Agency will oversee distribution of the larger state pool.

Steve Preston, secretary of the U.S. Department of Housing and Urban Development, announced during a visit to New Orleans last week that the federal agency had approved an action plan developed by the state for meting out the Neighborhood Stabilization Program funds.

Jeff DeGraff, a spokesman for the Louisiana Housing Financing Agency, said the program was designed to prevent foreclosed homes from sitting untended and dragging down housing values, not as a salve for distressed owners at risk of losing their property to the bank.

The state plans to use the stabilization money to provide soft second mortgages, downpayment assistance or other incentives to help buyers earning up to 120 percent of their area median income to purchase a home that has been foreclosed or abandoned. A quarter of the funds must be used for buyers earning no more than 50 percent of an area's mean income.

The program can also be used to help investors rehabilitate property for use as affordable rental housing. Applications for the funds will be available at the end of this month for individual investors, nonprofits and private sector developers, DeGraff said.

The New Orleans Redevelopment Authority has pinpointed several census tracts that will benefit from the neighborhood stabilization funds:

-- A section of Algiers bounded by General DeGaulle, Wall Boulevard and Cypress Acres Drive;

-- An area of the 7th Ward bounded by North Claiborne, St. Bernard Avenue, McShane Place and Elysian Fields;